DSO
Also known as days sales outstanding, debtor days, average collection period, debitordage, gennemsnitlig betalingstid
DSO (Days Sales Outstanding) is the average number of days from the moment you invoice until the money is in the bank.
In practice
DSO is the number a CFO uses to measure how well the business gets its money home. It translates the debtor ledger into a single figure that can be tracked over time and compared across companies and industries.
The key is the gap between your payment terms and your actual DSO. If terms are net 30 but DSO is 54, then 24 days of working capital are tied up in customers who pay late. On revenue of 400 kr. million, that is roughly 26 kr. million sitting outside the business instead of in the bank.
That is why reminder discipline is rarely a discussion about fees. A reminder fee of 100 kr. is not the issue. The 24 days are.
Where it commonly goes wrong
- DSO is measured, but never broken down. A single aggregate figure hides the fact that the problem usually sits with a few large customers. An aged debtor listing shows where it lies.
- DSO is improved by tightening the terms. That does not help if customers pay late anyway. What moves DSO is consistency — that the reminder actually goes out on day 1, every time.